Time to make money

(Part 2)

It is never too late to make money in this market! With the PHISIX reaching a new six-year high last week, we have never been more bullish on Philippine stocks.

In June 2003, when the PHISIX was at 1,073 (barely eight percent off its all-time lows), Philequity came out with a newsletter titled "The Market has bottomed!," urging our investors to put more money in the emerging bull market in Philippine stocks. We even held an investors briefing in Makati in August of that same year. We argued that the market, though bad as it looked back then, will never be worse "since the 1,000 level for the PHISIX has held through the most trying of time, namely: the Asian financial crisis of 1997, a major political crisis in 2000 (impeachment of former President Estrada), a financial market panic after the World Trade Center bombing in 2001, the US-Afgan and US-Iraq war in 2002, and the SARS scare of 2003." "And besides, the market has gone through a 7-year bull market from 1991 to 1997 and a 7-year bear market from 1997 to 2003. So who knows? … We may end up with another 7-year bull market," we said jokingly.

In August 2004, when the PHISIX was at 1,582, we wrote a newsletter titled "Grab the Bull by the Horns," immediately after President Arroyo announced that the country is in a fiscal crisis. Viewing this as an opportunity amidst a crisis, we urged investors "to grab and ride the bull market by the horns just as the government is tackling the fiscal debt problem head-on and grabbing it by the horns."

Four months ago, when the PHISIX was at 2,079, we wrote an article titled "It’s time to make money — Philequity Corner (Nov. 21, 2005)," saying that "We see a clear path towards fiscal revitalization and sustained economic upturn… Philippine assets are on the way up and you should be buying ROPs, Philippine debt papers, equities and the Peso."

Last week, in our article titled "Banking M&A fever continues — BUY BANK STOCKS, Philequity Corner (March 20, 2006)," we mentioned that "because of the banking consolidation that is going on, we expect an upward revaluation on all banking stocks. We also foresee this to be the catalyst that will push the banking index back to its 1999 highs, and consequently catapult the PHISIX towards our 12-month target of 2,300 to 2,400."

Banking consolidation story pushes the PHISIX another leg up

Again, our investors in Philequity and our readers who heeded our recommendation have gained since our call proved to be right on the money. The banking and financial services index was up 4.5 percent week-on-week. As expected, Equitable-PCI Bank and the mid-sized banks (which are also potential acquisition targets) gained the biggest for the week. Meanwhile, Philippine National Bank, which was last week’s laggard managed to catch up by gaining 14.1 percent.

True to our prediction last week, this new round of banking consolidation is proving to be the catalyst that is propelling the market to new highs. Moreover, the breadth last week’s run-up was positive as all sectors of the market gained with the All-Shares index surging 3.3 percent. This move should provide a stable base as the market moves another leg up.

Long-term market uptrend continues

The PHISIX closed at 2,208.13 last week — the highest since Aug. 27, 1999. Despite the political wrangling, coup threats and external factors such as high level of oil prices, the PHISIX has already managed to gain 5.3 percent since the start of the year.

Clearly, the PHISIX has broken thru major resistance at 2,172 and is on its way to test our next target at 2,400. As long as economic reforms continue and fiscal numbers do not disappoint, we believe that the PHISIX will eventually test the 2,600 level or the highs reached in 1999.

Following the trend is often the best path to profits

It has been almost three years since Philequity turned bullish on Philippine equities in June 2003. Since then, we’ve stayed put and the trend has continued to be our friend. We will remain bullish until the fundamentals and the charts concur to tell us otherwise.

Allow me then to end this article by quoting from one of the most highly regarded financial books ever written. First published more than 80 years ago, the book is also one of my favorites. "It’s a bull market you know … After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!" — Reminiscences of a Stock Operator by Edwin Lefevre.

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